State Champ Radio earnings
Page: 15
Recent news — quarterly earnings releases and a major investment — had big impacts on some music companies’ stocks Thursday (Feb. 9).
Warner Music Group shares fell 4.3% to $35.09 and dropped as much as 10.5% during the day following the company’s fiscal first quarter earnings release Thursday. Warner’s revenue fell 7.8% (2.7% at constant currency) to $1.48 billion and net income fell 34% to $124 million. A relatively light release schedule, a slowdown in ad-supported revenue and a shorter quarter — the prior year period had one additional week — contributed to the decline. New CEO Robert Kyncl called it a “tough quarter” and pointed to a slate of releases in the second half of the year by Ed Sheeran, Cardi B and David Guetta.
MSG Entertainment shares ended the day up 11.7% to $59.58 and reached as high as $61.33 during the day, up 15% from the prior day’s closing price. Revenue in the quarter rose 24% to $642.2 million. The proposed spinoff is expected to be completed by the end of March and the MSG Sphere in Las Vegas is slated to open in September. Investors had other reasons to cheer, however, as MSGE announced it implemented a cost reduction program that resulted in layoffs and other non-labor savings.
In Seoul, SM Entertainment shares rose nearly 19% to 117,000 won on Friday (Feb. 10) on news that HYBE acquired a 14.8% stake to become its largest shareholder, though shares dipped to 109,800 won, up 11.5%, by mid-morning. Likewise, HYBE shares climbed as much as 10.2% to 218,500 won ($172.76) before falling to 212,500 won ($168), up 7.2% from the previous closing price.
LiveOne shares gained 2.1% to $0.97 despite climbing as high as $1.09, up 14.7% from Monday’s closing price. The company raised its guidance for full-year adjusted EBITDA from $11 million to $12 million. LiveOne’s revenue for the quarter ended Dec. 31 declined 17% to $27.3 million due to its decision not to produce “capital-intensive tentpole or pay-per-view events” until next fiscal year. That decision, along with reduced annual expenses and overhead, helped LiveOne turn adjusted EBITDA from -$4.8 million to $3 million.
The U.S. markets broadly fell on Thursday. The New York Stock Exchange dropped 0.7% and the Nasdaq fell 1%. The S&P 500 fell 0.9%. Markets in Europe fared better, however. The DAX, an index of 40 blue-chip German stocks, rose 0.7%. The FTSE 100, a measure of 100 stocks on the London Stock Exchange, rose 0.3%.
Reservoir Media’s revenues rose and profit margins expanded last quarter, as the strength of its music publishing business helped offset a $4 million net loss, the company reported Wednesday (Feb. 8).
Reservoir reported that its top-line revenues rose by 16% to $29.9 million for the third quarter of its fiscal year 2023, which ended Dec. 31. The main drivers of that jump were the music publishing division, where revenues of $22 million jumped 14% from a year ago on strong digital streaming revenues, and Reservoir’s small artist management business, which delivered a year over year revenue increase of more than 200% from touring and merchandise sales at live events.
Reservoir founder and chief executive Golnar Khosrowshahi said the firm, which recently bought Dion‘s catalog and signed publishing deals with popular Indian rappers MC Altaf and D’Evil, has $2.3 billion in prospective catalog acquisition deals in its pipeline.
“We will continue to benefit from the overall momentum in the music industry,” Khosrowshahi said on a conference call discussing the quarterly results. “We are approaching the last fiscal quarter of the year with confidence.”
Reservoir raised its guidance for the fiscal year 2023, which ends March 31, for the second straight quarter. Executives said they now expect to report full-year revenue in the range of $120 million to $122 million and adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) in the range of $46 million to $47 million.
The company reported that its adjusted EBITDA for the third quarter rose 24% to $10.9 million.
“While we are happy with our continued strength in the top line and operating margins, we did experience some pressure on the bottom line due to elevated costs during the quarter,” said Reservoir CFO Jim Heindlmeyer during the earnings call.
Reservoir reported a net loss of $4.1 million, stemming from a one-time non-cash tax expense related to the higher U.K. tax rate for 2023 and the extinguishment of some existing debt. That resulted in a diluted loss of 7 cents for the quarter compared to earnings of 2 cents per share for the quarter.
Depreciation and amortization costs also rose due to catalog acquisitions, while company administration expenses rose 19%, mainly due to Reservoir’s expanding management business division.
In the recorded music division, Reservoir reported revenue of $7.6 million, up just 1% over last year. While digital revenues in the division rose 17% to $5.3 million, declines in physical and synchronization revenue resulted in roughly flat growth year over year.
Harry Styles, Mariah Carey and big streaming gains helped Sony Music Entertainment finish 2022 with a bang. Styles’ album Harry’s House and Carey’s typically strong holiday performance drove SME’s revenues up 22.9% to 363.7 billion yen ($2.57 billion at quarter’s average exchange rate) in its fiscal third quarter ended Dec. 31, 2022.
Styles’ 2022 release Harry’s House and 2019 album Fine Lines were among SME’s top performing titles of the quarter. Carey’s “All I Want for Christmas is You” topped the U.S. Hot 100 chart for four weeks (chart dates of Dec. 17, Dec. 24, Dec. 31 and Jan. 7). The company also pointed to strong sales and streams by Steve Lacy’s Gemini Rights, SZA’s SOS, Future’s I Never Liked You, Chris Brown’s Indigo, Beyonce’s Renaissance and Bruce Springsteen’s Only the Strong Survive.
Quarterly operating income improved 14.3% to 63 billion yen ($445 million). Adjusted earnings before interest, taxes, depreciation and amortization were 80 billion yen ($565 million).
The recorded music division’s revenues improved 30.1% to 239 billion yen ($1.69 billion). Streaming revenue grew 33.2% to 159.1 billion yen ($1.12 billion) and accounted for 66.6% of recorded music revenue, up from 65% in the prior-year period. Download revenue, up 14.3%, accounted for just 4.7% of digital revenues compared to 5.5% a year earlier. Physical sales declined 6% to 31.1 billion yen ($219.1 million) and accounted for 13% of total recorded music revenue, down from 18%.
Publishing revenues increased 42.9% to 74.2 billion yen ($523.4 million) in the quarter. Within publishing, streaming revenue improved 59.8% to 41.6 billion yen ($293.3 million). Streaming’s share of publishing revenue grew to 56% from 50.1% in the prior-year period. Other publishing income rose 25.9% to 32.6 billion yen ($230.1 million).
Excluding foreign exchange and the visual media and platform segment, SME’s recorded music and publishing divisions grew 10% in the quarter. That is a smaller improvement because changes in foreign exchange rates helped SME’s yen-denominated results. From the end of 2021 to 2022, the value of the yen declined against the three main foreign currencies: -10% against the U.S. dollar, -6.9% against the euro and -1.8% against the pound.
The visual media and platform segment was a drag on earnings due to lower anime sales, however. The segment’s revenue fell 16.3% to 47.4 billion yen ($334.7 million).
Looking ahead, the company maintained its forecast for full-year revenue at 1.37 billion yen (approximately $9.7 billion) at operating income at 265 billion yen (approximately $1.87 billion).
A rebound in the live music business helped German concert promoter CTS Eventim improve its revenues to 694.4 million euros in the third quarter ($699.3 million at the average exchange rate in the quarter), 84% higher than the same period in 2019 before the COVID-19 pandemic, the company announced Thursday.
Revenue increased due to contributions from pre-sales, the staging of events and higher income from currency conversion. That was offset by a reduction in COVID-19 economic aide, received as compensation for event cancellations or events with reduced capacity, of 76.8 million euros ($77.3 million) from the prior-year period.
“These excellent results are testimony to the fact that our strategic initiatives are taking us from strength to strength following the post-pandemic restart of live entertainment,” said CEO Klaus-Peter Schulenberg in a statement. “Even in the face of new uncertainties caused by the high level of inflation and geopolitical factors, we will maintain this proven course in order to continue to drive our profitable growth, both at home and abroad.”
The live entertainment segment’s revenue was 563 million euros ($566.9 million) in the third quarter, up 103.6 from the same period in 2019, and 1.11 billion euros ($1.11 billion) in the nine-month period, a 42% improvement. Live entertainment EBITDA was 64 million euros ($64.4 million), about triple the amount in the same period of 2019.
The ticketing segment’s revenue improved to 137 million ($138 million) in the third quarter, up 28% from the same period in 2019, and to 339 million ($341.1 million) for the nine-month period, up 10.4% from 2019. CTS Eventim sold 17.2 million tickets in the quarter and 45.1 million tickets in the nine-month period, increases of 31% and 23%, respectively, from the pre-pandemic periods in 2019.
The company’s staff, including part-time workers, grew from 2,357 a year ago to 2,956 at the end of the third quarter.
The company sounded an alarm about rising costs stemming from higher personnel costs in security, catering and stage technology “induced by an increasing shortage of specialists in the event industry and at least temporarily higher demand due to the fact that both postponed and new events are currently being held at the same time,” it explained in its earnings release. The fourth-quarter results could be hampered by rising energy prices and a possible pullback of fan spending due to inflation’s impact on household purchasing power.
Still, CTS Eventim is going to have a record year in 2022. The company expects full-year revenue of 1.7 billion euros ($1.71 billion) and earnings before interest, taxes, depreciation and amortization of 330 million euros ($332.3 million). That would represent gains of 17.8% and 16.2% over 2019, which was a record year for CTS Eventim. The company’s tenor improved from a quarter ago, when management was unable to provide a precise forecast for 2022 “owing to uncertainty about the pandemic and the geopolitical situation going forward.”
CTS Eventim shares fell 0.3% to 56.00 euros on Thursday. Year to date, the share price is down 13%.
In its third-quarter earnings report Tuesday (Nov. 15), China’s leading music streaming company Tencent Music Entertainment Group (TME) said quarterly net profits soared 39% to RMB 1.09 billion ($154 million USD) from last year as the number of online music subscribers reached a record 85.3 million.
TME, which owns streaming platforms QQ Music, Kugou and Kuwo, plus karaoke app WeSing, reported that music subscriptions rose 18.3% to RMB 2.25 billion (USD $316 million) for the third quarter ending Sept. 30 compared to the same period in 2021. The number of subscribers rose by nearly 20%, up from 71.2 million in the third quarter 2021.
“As we are employing a balanced approach to grow paying users…revenues from online music services increased at a healthy pace in the third quarter, driven by year-over-year gains in subscriptions,” Cussion Pang, TME’s executive chairman, said in a statement. “Meanwhile, effective cost optimization measures and improved operating efficiency led to increased profitability amid challenging macro conditions this quarter.”
Overall, online music services revenues rose by 18.8% to RMB 3.43 billion (USD $482 million), but that wasn’t enough to offset a 20% decline in revenues from social entertainment and services, the company’s other main business unit. TME’s total revenues fell by 5.6% to RMB 7.37 billion (USD $1.04 billion).
Media companies have reported widespread declines in mobile revenues for the third quarter, as increased prices for many and the worsening economic outlook globally has caused consumers to rethink everyday expenses. TME was not spared from the trend. The number of monthly active mobile music users fell by 7.7% to 587 million in the quarter, compared to 636 million in the third quarter last year — a decline the company attributed to casual listeners dropping off the platform.
Monthly average revenue per paying user of TME’s online music edged 1% lower, to RMB 8.8 million (USD $1.24 million) compared to RMB 8.9 million (USD $1.25 million) during the year-ago period.
The company bought back $800 million of its own stock in the third quarter, part of a $1-billion stock buyback program it announced last spring.
In September, TME launched a secondary listing on the Hong Kong Stock Exchange; it was already publicly traded on the New York Stock Exchange in the United States. Its move to issue secondary shares in Hong Kong followed similar moves by other big Chinese companies seeking to safeguard themselves against potential ramifications of the geopolitical tensions between China and the U.S.
SM Entertainment, home of such K-pop groups as NCT 127, SuperM and Girls’ Generation, had revenue of 238.1 billion KRW ($165 million at the Sept. 30 exchange rate) from July 1 to Sept. 30 — up 65.4% year-over-year and a 29.1% improvement from the previous quarter, the company announced Monday (Nov. 14).
Operating margin — operating profit as a percentage of revenue — improved to 12.5% in the third quarter of 2022, up from 6.9% in the prior-year period. Net income was 29.2 billion KRW ($20.2 million), up 129.5% year-over-year and 15% higher than the second quarter.
The company’s multi-pronged business, which generates revenue across all facets of its artists’ careers, improved across the board: Recorded music revenues grew 46.6% to 135.1 billion won ($93.6 million). SM Entertainment’s album sales improved from 3.25 million units in the prior-year period to 4.7 million units. It had two standout releases in the quarter: NCT 127’s 2 Baddies peaked at No. 3 on the Billboard 200 albums chart and Aespa’s Girls: The 2nd Mini Album topped Billboard’s Top Album Sales chart.
Concert revenues climbed to 10.9 billion won from virtually nothing a year ago. In the quarter, Revenue from appearances — including television, advertising and events — grew 96.4% to 24.3 billion KRW ($16.8 million). Licensing revenue improved 76.1% to 26.4 billion KRW ($18.3 million).
Revenue at SM Entertainment’s subsidiaries grew 119.5% to 136.9 billion KRW ($94.9 million). These companies include Dream Maker, a Hong Kong-based concert booking agency; SM Culture & Contents, a content production and advertising business; and Keyeast, a Korea-based merchandising and licensing business. According to the release, these subsidiaries benefitted from the reopening of domestic and international touring and increased demand for advertising promotion and business-to-business travel.
Several SM Entertainment artists are on tour in the fourth quarter: NCT 127 has nine dates in Korea, U.S., Thailand and Indonesia; Super Junior has six concerts in Indonesia, Hong Kong and Taiwan; and Ryeowook and NCT Dream have six and five concerts in Japan, respectively.
The company’s fourth-quarter release schedule includes new mini albums by Chen, BoA and Red Velvet and Red Velvet member Seulgi. Red Velvet’s Feel My Rhythm album peaked at No. 20 on the Billboard Global Excl. US chart in April; it also landed on the Indonesia Songs (No. 3), Malaysia Songs (No. 5), Phillippines Songs (No. 15) and Taiwan Songs (No. 16) charts. The group’s The ReVe Festival: Finale EP reached No. 40 on Billboard’s Top Album Sales chart in January 2020.
SM Entertainment’s shares rose 0.5% on Monday to 65,800 KRW. Down just 11.3% in 2022, SM Entertainment’s share price has fared better than Korean music companies HYBE (down 61.2%) and YG Entertainment ( down 26.4%) but lags behind JYP Entertainment (up 12.0%), home of Twice, Stray Kids and iTZY.
SM Entertainment’s shares rose 19% on Sept. 16 after the company announced would prematurely end a contract with a production company owned by the company’s founder and largest shareholder, Lee Soo-man. Its share price, however, has fallen 14% since then.
The Ledger is a weekly newsletter about the economics of the music business sent to Billboard Pro subscribers. An abbreviated version of the newsletter is published online.
Most publicly traded companies have released earnings for the latest quarter (ended Sept. 30), and most of those results have shown encouraging signs for investors and the music industry alike. Earnings by Universal Music Group, Spotify, Live Nation, SiriusXM are in the books. Notable companies yet to announce include Warner Music Group (Nov. 22) and Tencent Music Entertainment (Nov. 15).
If there is one over-arching narrative, it’s that inflation and economic uncertainty haven’t ruined music’s post-pandemic recovery. Revenue growth is strong, aside from some softness related to a slowdown in advertising spending that impacts broadcast radio and ad-supported streaming. Consumer spending on everything from concerts to vinyl records is healthy – despite the around-the-clock warnings of an impending recession and the highest inflation rates in four decades eating into consumers’ wallets. When companies have raised prices for tickets and concessions at concerts, music fans, by and large, haven’t blinked. Even long-stagnant music subscription prices are on the rise, and nobody expects a consumer backlash.
Not that music companies’ stock prices reflect this optimism. Stocks in general have taken a beating in 2022. Music stocks have suffered, too, although stocks ended the week on a high note. The Billboard Global Music Index, a measure of 20 publicly traded music companies’ stocks, climbed 12.7% this week after markets rallied on Thursday and Friday on encouraging news about the slowing U.S. inflation rate.
Here are five quick takeaways from third-quarter earnings and the statements made by the companies’ management teams.
1. The subscription business model is insulating creators and rights holders from economic uncertainty. Music royalties are popular with investors in part because they are counter-cyclical, meaning their returns have little correlation with changes in the broader market. Put another way, when the economy sours, people are more likely to cut back on grocery spending or travel than cancel a Spotify subscription. Consumers might feel pinched in their pocketbooks, but Spotify and SiriusXM added 7 million and 187,000 subscribers, respectively, in the third quarter, and YouTube announced on Wednesday that it surpassed 80 million subscribers to YouTube Music and Premium, an increase of 30 million in about 14 months. Stock prices at companies more exposed to inflation pressures fared best on Thursday, as stocks surged on news that the annual change in the consumer price index in the U.S. fell to 7.7%. Shares of radio companies iHeartMedia and Audacy climbed 10.0% and 14.0%, respectively. Live entertainment companies also did well: MSG Entertainment was +5.6%, Live Nation was +5.1%, and ticketing companies Eventbrite and Vivid Seats were +8.3 and +9.2%, respectively.
2. Podcasts are a growing, stabilizing force. Spotify’s podcast business has rightly captured headlines as the company uses spoken-word content to build engagement, generate advertising revenue and improve on the gross margins of its core music business. The number of monthly users who consumed podcasts grew “in the substantial double-digits” year-over-year, the company said. But other companies’ podcast businesses get less attention despite their importance to their own futures. Radio companies – namely iHeartMedia, Cumulus Media and Audacy – have fast-growing podcast businesses. LiveOne, primarily a music streaming company, has a fast-growing podcast division, PodcastOne, that made $17.2 million of revenue in the last two quarters on the strength of such shows as The Adam Carolla Show, Cold Case Files and Uncut with Jay Cutler. The catch is that podcast growth has little direct impact on the music business outside of helping those platforms – digital and broadcast – that produce royalties for record labels and publishers. Music rights owners could better tap into this growing market if there were better systems for licensing music to podcast creators.
3. With share prices relatively low, companies are increasingly buying back shares to bolster shareholder value and help share prices. Among the companies currently engaged in stock repurchase programs are Spotify, MSG Entertainment, Cumulus Media, Audacy, SiriusXM, Townsquare Media and LiveOne. Spotify announced a $1 billion share buyback program in August 2021, and it spent $2 million and $24 million repurchasing shares in the second and third quarters, respectively. Cumulus Media has $21.1 million remaining in its $50 million share repurchase authorization announced in May. Last month, MSG Entertainment authorized $75 million for share buybacks on top of a $175 million, one-time dividend worth $7 per share paid on Oct. 31 to shareholders of record on Oct. 17. And LiveOne announced on Thursday that it will expand its share repurchase program, originally planned for 2 million shares (worth about $1.5 million at Friday’s closing price), by an additional $2 million. More buybacks could be on the way soon: Universal Music Group shareholders voted in May to give the company’s board the ability to repurchase up to 10% of the issued share capital.
4. Strong growth in “rest of world” markets. Believe’s revenue in Asia Pacific and Africa grew 61.1% to 52.3 million euros ($53.2 million), about the same as its European revenues excluding France and Germany. Spotify’s “rest of world” markets improved their share of monthly active users to 26% in the third quarter, up from 21% in the prior-year period. Also, “rest of world” and Latin America each gained a percentage point in shares of Spotify subscribers while North America and Europe both lost a percentage point of subscriber share. As Billboard’s Elizabeth Dilts Marshall reported last week, investors are increasingly eyeing companies in the Middle East and North Africa as streaming transforms those regions.
5. Spinoffs are going to separate high-growth, high-potential businesses. MSG Entertainment plans to spin off its MSG Sphere venue currently under construction in Las Vegas along with its Tao Hospitality Group. The remaining MSG Entertainment will retain the live entertainment business – namely the portfolio of venues such as Madison Square Garden and Radio City Music Hall – and MSG Networks, a sports broadcast network. Ryman Hospitality will spin off its Opry Entertainment Group – possibly within four years, based on its agreement with two new investors, Atairos and NBCUniversal. LiveOne plans to file an S-1 document with the SEC by Dec. 15 for a spin-off of its podcast division, PodcastOne, which accounted for about 37% of the company’s total revenues in the six-month period ended Sept. 30. LiveOne’s management and board believe the company’s share price undervalues the sum of its parts and spinning off PodcastOne would maximize shareholder value and better position the division for M&A and talent acquisition.
Despite various economic headwinds, including inflation, we have not seen any pullback in demand,” Live Nation CEO Michael Rapino said during the company’s earnings call on Thursday (Nov. 3). In the third quarter, Live Nation posted record revenue for its concerts division of $5.3 billion as well as the company’s best-ever gross transaction value at its Ticketmaster division of $6.7 billion. Its high-margin sponsorship and advertising division also produced record adjusted operating income of $226 million, up 56% from the same period in 2019.
Looking ahead to 2023, Live Nation is “feeling very good about the attendance levels for next year,” said president and CFO Joe Berchtold. “Our tickets sold for the shows that we have on sale for next year are up consistently across all venue types relative to a year ago.” Excluding rescheduled events, Ticketmaster’s sales for 2023 concerts are up by double digits compared to advance ticket sales at the same point in 2021.
Demand depends on the supply of artist tours, and Live Nation executives believe next year’s tours will have a similar level of quality as this year’s headline tours, which included runs by Bad Bunny, Red Hot Chili Peppers and The Weeknd, among others. “If you were a stadium act, a large selling arena act, you probably debated whether you went out in ‘22 or you went out in ‘23,” said Rapino. “From clubs to stadiums to arenas, it looks like a similar year [in terms of] quality.” Next year, Live Nation will promote tours by Taylor Swift, Blink-182, Shania Twain, Dead & Company, Depeche Mode and the Eagles.
The warning signs for pending economic doom are everywhere. On Thursday, hedge fund giant Elliott warned of a “global societal collapse” and a further 50% decline in equity markets due to hyperinflation and an end to an “extraordinary” period of cheap money. The same day, the Bank of England warned that the U.K., facing high energy costs and rising interest rates, could suffer its longest-ever recession and a possible doubling of unemployment over the next two years.
The biggest banks have raised concerns, too. On Wednesday, Citi said the U.S. could fall into a recession in the second half of 2023. JPMorgan Chase & Co. CEO Jamie Dimon said earlier this month the global U.S. economies would hit a recession in mid-2023, although he added the U.S. economy was “actually still doing well” at present.
The U.S. economy is a grab bag of mixed signals that point to both resilience and stress. U.S. payrolls increased by 261,000 in October. Yet auto loan delinquencies are on the rise, according to TransUnion, and repeated interest rate hikes by the Federal Reserve means consumers with credit card balances will pay more in interest.
But Live Nation’s numbers show fans are spending money on concerts in record numbers. At Live Nation’s U.S. amphitheaters and global festivals, ancillary fan spending — which covers items such as food, beverage, merchandise and parking — in the third quarter increased almost 30% to $38 per fan from the same period in 2019. At U.S. and U.K. theaters, ancillary fan spending increased by over 20% relative to 2019.
Even with BTS on hiatus, the band’s label and agency HYBE grew revenues 445.5 billion KRW ($308.7 at the Sept. 30 exchange rate) from July to September — up 30.6% from the year-prior period, according to the company’s third-quarter earnings report released Thursday. But compared to second-quarter revenue of 512.2 billion KRW ($354.9 million), revenue was down 13%.
The “artist direct-involvement” segments of the business showed mixed results in the quarter. Music sales of 129.2 billion KRW ($89.5 million) were 0.4% year-over-year and 38.7% lower than the previous quarter. Concert revenue of 47.2 billion KRW ($32.7 million) was a vast improvement over zero in the third quarter of 2021 but lower than the first and second quarters. Revenues from ads, appearances and management fell 11.7% year-over-year to 29.8 billion KRW ($20.2 million).
HYBE saw better performance from its “artist indirect-involvement” segments that are less dependent on the timing of music releases and tour dates. Merchandising and licensing revenue grew 49.5% year-over-year to 144.7 billion KRW ($100.3 million). Contents revenue climbed 22.9% to 107.2 billion KRW ($74.3 million). And fan club revenue improved 27.5% to 17.3 billion KRW ($12 million).
Though the first nine months of the year, HYBE’s revenue improved 55.7% year-over-year to 1.24 trillion KRW ($859.2 million) and its operating profit increased 59.% to 185.9 billion KRW ($128.8 million). Operating margin improved from 14.6% to 15%.
Despite the impressive growth, HYBE is facing a dilemma. The company is without its biggest artist, BTS, after members went on hiatus earlier this year and will soon face mandatory military service in Korea. Losing its cash cow — until “around 2025,” according to an Oct. 17 letter to shareholders from CEO Park Ji-won — leaves Hybe with a tricky balancing act: In the absence of BTS new music and tours, the company must make up the difference with individual members’ solo projects and a slate of successful and up-and-coming artists. With only a retrospective album, Proof, and no concert dates since April, BTS will still account for 60-65% of HYBE’s 2023 revenue, Park said during the earnings call. The remaining 35-40% of revenue will come from a growing roster of young artists and Ithaca Holdings, which HYBE acquired in 2021.
In recent years, HYBE has diversified to reduce its reliance on BTS and build a more stable portfolio of companies and artists. Through its nine record labels in Korea, Japan and the U.S., HYBE has built a diversified roster that “helps us avoid a risk of concentrating on a certain country, a certain genre, and allows us to flexibly respond to the changing external situations and trends, thereby reducing the overall business risk,” said CFO Lee Kyung-Joon.
Ithica Holdings added both recorded music catalog (through Big Machine Label Group) and artist management clients (through SB Projects). Its founder, Scooter Braun, is now co-CEO of HYBE America. When asked by an analyst what synergies Ithaca provides more than a year after the merger, Park pointed to the newfound ease and efficiency of launching projects in the U.S. under Braun and co-CEO Lenzo Yoon. Also, Ithaca’s U.S. artists will join HYBE’s WeVerse social media platform in 2023, Park added, and HYBE is pursuing opportunities for the businesses of Ithaca artists Justin Bieber (Drew House) and Ariana Grande (R.E.M. Beauty) in Asia.
In Korea, HYBE’s roster includes such up-and-coming artists as Le Sserafim, released through its Source Music imprint, whose first two albums have surpassed a combined 1 million units sold. NewJeans, released through HYBE’s ADOR imprint, has cumulative sales of 620,000 of its debut, self-titled EP released in August. Outside of Korea, HYBE is taking its model for discovering and developing new artists to the world’s two largest music markets. In Japan, HYBE Labels Japan is prepping the December launch of &Team, a nine-person, multinational boy band. In the U.S., HYBE has a joint venture with Universal Music Group’s Geffen Records and is developing a global girl group.
Hybe’s plan for global growth goes beyond its growing artist roster. A broad strategy termed by Park as “expansion through cooperation across boundaries” includes mergers and acquisitions, joint ventures, equity investments and partnerships. “In order to expand the multi-label strategy, we’re considering various partnerships and investments with labels, catalog companies and talent management companies in overseas markets such as the U.S. and Japan, thereby strengthening our music I.P. portfolio,” Park said. “Through this approach, we except that greater synergies will be created with our superior solutions capability on concerts, merchandising and content to deliver greater results.”
But in the short term, HYBE doesn’t have a quick solution for replacing BTS, and Park warned that declining BTS revenue — namely lost concert revenue — will put pressure on HYBE’s margins in 2023. That should change as groups such as Seventeen and Tomorrow X Together gain popularity and perform in larger venues. Compared to BTS, those artists’ margins are “not very different from the margin of BTS — other than concert revenue,” he said. “Therefore, as these groups continue to grow, I believe that margin will improve accordingly…starting from 2024.”
With HYBE’s share price down 64.9% year to date, mostly due to BTS’s hiatus, the company is considering additional ways to improve shareholder return, including share buybacks and dividends. Park said the company will reveal more about those plans in early 2023.
Live Nation set records for concert revenue and ticket sales in the third quarter of 2022 as the touring industry continued its recovery from the COVID-19 pandemic. Third-quarter revenues were $6.2 billion, 66.8% greater than the same period in 2019, while adjusted operating income increased 45% to $621 million, the company announced Thursday (Nov. 3).
“Fans around the world continue prioritizing their spend on live events, particularly concerts,” said president and CEO Michael Rapino in a statement. “Despite varying economic headwinds including inflation, we have not seen any pullback in demand, as on-sales, on-site spending, advertising and all other operating metrics continue showing strong year-on-year growth.”
The concerts division tallied its highest-ever quarterly attendance with 44 million fans at 11,000 events that generated $5 billion of revenue and $281 million of adjusted operating income (AOI), up 67% and 44%, respectively, from the same period in 2019. Demand was strong across all types of venues and markets. Stadium attendance tripled to almost 9 million as many top artists, including Bad Bunny (the highest grossing Latin tour in Boxscore history), Red Hot Chili Peppers and The Weeknd, took advantage of strong fan demand by performing the larger venues.
Ticketmaster also had a record-breaking quarter by delivering its highest fee-bearing gross transacted value of $7.3 Billion, a 62% increase from the same period in 2019. Ticketing revenue was $343 million, up 96.7% year-over-year and 36.8% greater than the same period in 2019. Ticketing’s AOI of $163.2 million was 5% lower year-over-year but 28.2% above the third quarter of 2019.
Ticketmaster has made headlines because some artists — namely Bruce Springsteen and Blink-182 — opted for dynamic pricing that charged more for the best seats. The practice may frustrate some fans, but Live Nation expects to transfer over $550 million to artists through higher primary ticket prices — value that might otherwise have been captured on the secondary ticketing market.
Sponsorship and advertising revenue was up 59.4% to $343 million on the strength of Live Nation’s festivals and Ticketmaster platform integration. The high-margin segment’s AOI of $226.2 million was 103.4% better year-over-year and 69.8% higher than the same period in 2019. Confirmed sponsorship revenue for 2023 is up 30% over the same period a year ago.
Through September, ancillary fan spending at U.S. amphitheaters was up 30%. “The consistent theme is that fans are eager to enhance their experience, as we continue elevating our hospitality operations and provide more premium options,” said Rapino.
Looking ahead, the busy touring season will continue into 2023 and consumer demand appears to be holding strong despite widespread fears of an upcoming recession and tightening budgets due to persistent inflation. “Ticket sales for shows in 2023 are pacing even stronger than they were heading into 2022, up double-digits year-over-year, excluding sales from rescheduled shows,” said Rapino. Through the third quarter, Ticketmaster sold over 115 million, up 37% from the same period in 2019.
Live Nation’s share price rose 4.6% to $79.90 in after-hours trading on Thursday following the earnings release.
Financial metrics
Total revenue: $6.2 billion, up 63.TK% from 2019
Adjusted operating income: $621 million, up 45% from 2019
Concert revenue: $5.29 billion, up 66.8% from 2019
Ticketing revenue: $531.6 million, up 36.8% from 2019
Sponsorship and advertising: $343 million, up 59.4% from 2019
Fan metrics
North America concerts; 8,261, up 14% from 2019
International concerts: 2,958, up 57.4% from 2019
North American fans: 29.1 million, up 27.7% from 2019
International fans: 15.2 million, up 71.9% from 2019
Fee-bearing tickets: 73.4 million, up 32.7% from 2019
